ECONOMY

Trichet rules out debt haircut

Greece should stick to the terms of memorandum it has signed with its creditors religiously, European Central Bank President Jean-Claude Trichet stressed on Thursday, while brushing aside any suggestion of a Greek debt restructuring.

?I was quite clear in my message about fiscal adjustment. It [applies to] all countries [concerned] and of course Greece, too,? Trichet said. ?The key to credibility remains the strict application of the fiscal adjustment. We have a plan. We apply the plan and [restructuring] is not part of the plan,? he continued.

?What we consider important is the effort for fiscal streamlining and there is a fiscal plan that we are asking to be applied,? the ECB head added.

Sources suggest that the ECB has made it known to all concerned that if any form of debt restructuring is decided upon, it will stop accepting Greek bonds, which banks use to obtain funding. Asked what the possible damage would be to the ECB from a possible debt restructuring within the eurozone, Trichet countered that ?this is not the problem.?

Athens was happy to hear yesterday that the ECB will not raise interest rates as fast as the market had expected.

The Inner Cabinet decided yesterday that the midterm financial stability program will be tabled in Parliament by May 18. ?All parliamentary procedures will be followed and it will be voted with a simple majority,? government spokesman Giorgos Petalotis said.

Apostolos Tamvakakis, managing director of National Bank of Greece, told entrepreneurs and clients at Ioannina that ?a debt haircut does not constitute an alternative because it would signify the country?s destruction, taking it back decades.?

He added that ?such discussions do not do any good? and proposed that ?what we should do is focus our efforts on the fiscal adjustment and reform of the country?s economy.? He then estimated that ?we can and we should succeed; we will make it.?

In Germany, Der Spiegel magazine argued on Thursday that Portugal should avoid Greece?s errors, while newspaper Die Zeit estimated a Greek debt restructuring would cost German banks about 40.6 billion euros, according to an economic research institute in Dusseldorf.